Goddard: Use borrowing to close state budget gap

Terry Goddard speaks during a news conference in front of Capitol Elementary School Oct. 7 in Phoenix. (AP Photo/Ross D. Franklin)

Arizona’s race for governor sharpened today as Democratic nominee Terry Goddard said he’d use additional borrowing to close most of the state’s midyear budget shortfall without resorting to education funding cuts that he charged Republican Gov. Jan Brewer is poised to make after the election.

Goddard, who also said future budgets can be balanced by eliminating or reducing numerous tax breaks, based his charge that Brewer’s plans on contingency budget cuts that would have taken effect had voters not approved a temporary sales tax effect. Those cuts were focused on education.

“I’m in law enforcement, and I have to use circumstantial evidence occasionally, and this is circumstantial evidence,” the state’s attorney general said, adding that he was forced to project Brewers’ budget approach because she won’t debate him again.

“She’s in deep hiding,” he said during a news conference held the same day that early voting started, meaning that the campaign is in its final weeks leading up to the Nov. 2 general election. “So until she makes a definitive statement to the contrary, I’ve got to say that the thing that she signed … is on the barrel today to meet this shortfall.”

Brewer said through a spokesman that she also supports significant new borrowing to help close the midyear shortfall of up to $825 million, but acknowledged that some additional spending cuts will be needed.

Her spokesman, Paul Senseman, said Brewer’s administration is working on her budget proposal to give to lawmakers in January but he said they likely will consider the contingency cuts as an option.

Senseman also said Brewer is not urging voters to vote for, or against, a ballot measure, Proposition 302, that would eliminate the First Things First early childhood development program and shift its funding to the state general fund to help balance this year’s budget and future ones.

But she does want to revive the idea of borrowing $350 million from that program if voters keep it alive, he said.

The budget that the Republican-led Legislature approved and Brewer signed last spring for the current fiscal year anticipated voter approval of the ballot measure to shut down First Things First.

“What she’s been saying throughout the state now for weeks and months, as well as what she proposed in her budget back in January 2010, that it will take a combination of additional streamlining of government, as well as some of these borrowing tools in First Things First, to cover any potential shortfalls as a result of any voter decisions in November,” Senseman said.

He said Goddard’s approach ignores costly spending mandates imposed on the state by the federal health care overhaul and that it was long overdue for Goddard to shed light on his own intentions.

Most of the $862 million of contingency cuts would have fallen on education, including $428 million in K-12 school funding cuts that education officials said would force layoffs of teachers and other school workers, increase class sizes and reduce some specialized instruction.

Goddard said he would get $700 million to close the current year’s shortfall through several forms of borrowing. An additional $125 million would come from unspecified budget transfers, he said.

“We must draw a line, and we must draw it now. No more attacks on education,” he said. “What I would propose to do is not pleasant, but we can do it without raising taxes and further cutting education.”

His idea to bail the state out of future troubles include eliminating or reducing numerous exemptions, credits and other tax breaks to raise additional state revenue. That would raise tax obligations of the individuals or companies now benefiting from those provisions.

During a news conference, Goddard released a 10-page list of those tax provisions with a cumulative pricetag in the tens of billions of dollars.

He didn’t include recommendations on which should be eliminated or reduced. He said state policymakers should review the tax provisions to see if they’re justified or just benefit special interests at the expense of most taxpayers.

But he told reporters that he wants to keep some, including the sales tax exemption for food purchases.

When pressed to provide a big-ticket item that he wants to eliminate, he cited tax breaks for the mining industry. Those could add up to $100 million, he said.

Others Goddard mentioned included a corporate credit for accounting costs and the sales tax exemption for auto warranties and country club memberships.

He has previously said the state should suspend its income tax credits for donations for school programs.